Special Costs Awarded Against Executor “Too Involved” In Court Case

In Wilson v Lougheed 2012 BCSC 1166, Justice Ballance awarded special costs for 4 of a 14 day trial against an executor who crossed the line in a highly charged Wills Variation case advanced by his daughter.

Paragraphs 25 and 26 sum up the essence of her decision:

25- “The law demands that, as executor, Mr. Lougheed comport himself impartially in the WVA Claim.  In discharge of his neutral fiduciary role, Mr. Lougheed was expected, at a minimum, to provide the court with an unbiased and accurate information about the date of death assets and liabilities of the estate.  He purposefully elected not to do so.”

26.  “While Mr. Lougheed was free to engage in litigation warfare with his daughter in his personal capacity, the scope of his conduct qua executor was significantly constrained.  He manipulated his fiduciary office to advance his own personal gain.  That conduct is reprehensible and attracts judicial censure in the form of special costs.”

The Law Relating to Costs in Estate Litigation

[16]         It is well-settled that the usual rule is that costs follow the event, meaning that the substantially successful litigant is entitled to recover costs from the unsuccessful opposing party:  Fotheringham v. Fotheringham, 2001 BCSC 1321, leave to appeal ref’d 2002 BCCA 454

[17]         Special costs are awarded as a means of discouraging and chastising a litigant whose conduct is considered by the court to fall within the classification of reprehensible:  Stiles v. B.C. (W.C.B.) (1989), 38 B.C.L.R. (2d) 307, 39 C.P.C. (2d) 74 (C.A.).  Reprehensible conduct is defined broadly and encompasses misconduct ranging from scandalous and outrageous at one extreme, to milder forms of misbehaviour warranting judicial rebuke at the other:  Garcia v. Crestbrook Forest Industries Ltd. (1994), 119 D.L.R. (4th) 740, 9 B.C.L.R. (3d) 242 (C.A.).

[18]         Rules regarding costs have been developed in relation to select types of estate litigation.  They add complexity by differentiating entitlement to costs depending on whether a party has been joined as an executor/ trustee and on the nature of the failed allegations.  Special costs are routinely awarded to a party who is a fiduciary in circumstances where there has been no reprehensible conduct by that party or any other litigant:  Mawdsley v. Meshen, 2011 BCSC 923 [Mawdsley]. 

[19]         Although not rigidly applied, the tendency of this Court over the last number of years has been to invoke the usual rule that costs follow the event in relation to wills variation actions:  see, for example, Picketts v. Hall Estate, 2007 BCSC 1278, 2009 BCCA 329.  However, that rule does not generally apply to an executor involved in such a dispute.  That is because executors are required to be joined to a wills variation action and their role in relation to that proceeding is expected to be neutral and limited in scope:  Steernberg v. Steernberg, 2007 BCSC 953.  In the absence of misconduct, an executor is ordinarily entitled to recoup from the estate the legal costs reasonably incurred in the variation proceeding no matter the outcome, assessed as special costs:  Mawdsley; Campbell v. Campbell, [1986] B.C.J. No. 1221 (S.C.).

[20]         In the case at hand, Mr. Lougheed’s conduct relative to his misappropriation of the RIF proceeds and treatment of the Lexus was carried out in the pre-litigation phase, as distinct from misconduct in the litigation per se.  Although the jurisprudence now accepts that the successful party may be entitled to receive special costs in connection with reprehensible conduct that gave rise to the litigation, the matter calls for individualized consideration.

[21]         As explained by Mr. Justice Goepel in Bronson v. Hewitt, 2011 BCSC 102 [Bronson] at para. 142:

The circumstances in which pre-litigation conduct will lead to an order of special costs is a matter of some contention. In the normal course, special costs are limited to misconduct or reprehensible conduct in the proceedings. As Bauman J.A., as he then was, said in Evergreen Building Ltd. v. IBI Leasehold Ltd., 2009 BCCA 275 at paras. 27 to 29:

[27] The general rule (that special costs are given only with respect to or in situations of misbehaviour in the conduct of the litigation) finds expression in, amongst others, Nygard International Ltd. v. Robinson (1990), 46 B.C.L.R. (2d) 103 (C.A.).  At paras. 89 and 90 Levine J.A. summarized the current position in British Columbia:

[89] The respondents point out that in Nygard, the Court said only that “as a general rule” special costs are awarded for conduct in the litigation, and note that Stiles and the decisions adopting Lambert J.A.’s words were decided after Nygard.

[90] The authorities do not establish any rigid rule that would prohibit an award of special costs where pre-litigation conduct is “reprehensible” and warrants rebuke. As Lambert J.A. noted in Sun Life Assurance [2000 BCCA 231, 76 B.C.L.R. (3d) 93], however, “special costs are usually awarded only in relation to misconduct during the course of the litigation itself.”

[28] The reference to the decision in Sun Life Assurance Co. included this quote from Lambert J.A.’s reasons in that case at para. 54:

[54] Special costs are usually awarded only in relation to misconduct in the course of the litigation itself. However, there may arise circumstances where special costs may be awarded because of reprehensible conduct giving rise to the litigation, particularly where the fruits of the litigation do not provide any appropriate compensation in relation to the reprehensible conduct.

[29] The state of the law, in light of the conflicting authorities, is as expressed in Dockside Brewing Co. Ltd. Any further refinements in the area would require a decision by a five judge panel of this Court.

[22]         In my view, Mr Lougheed’s pre-litigation misconduct with respect to his misappropriation of the RIF proceeds and the Lexus was plainly reprehensible.  However, I find that the “fruits” of the litigation in this case appropriately compensated Ms. Wilson for her father’s reprehensible pre-litigation conduct.  In light of that, I conclude that an order for special costs relative to that conduct is not warranted.

[23]         That a party or other witness has been untruthful at trial or lacks credibility, of itself, is generally not sufficient to support an award for special costs:  Bronson; Webber v. Canadian Aviation Insurance Managers Ltd., 2003 BCSC 274.  More deplorable conduct is required to sustain an award of special costs such as where the falsehoods were deliberate and intended to mislead or perpetrate a fraud on the court:  Bronson; Marchen v. Dams Ford Lincoln Sales Ltd., 2010 BCCA 29Equus Technologies Inc. v. Sage Automation Corp., 2003 BCSC 1783.

[24]         The general rule is that where special costs are awarded, they are to be awarded for the entire proceeding: Coulter v. Ball, 2003 B.C.S.C. 1186.  The court is not typically inclined to be put to the task of finely measuring the amount of time spent on litigating specific issues and allocating special costs to some portion.  However, that is not an inviolable maxim.  It remains open to the court, in appropriate cases to exercise its discretion so as to award special costs in respect of a period of time, including the number of trial days, attributable to the reprehensible conduct:  Muncaster v. Nunnenmacher, (1996), 76 B.C.A.C. 211; Prince Rupert (City) v. Pederson (1994) 50 B.C.A.C.249, .98 B.C.L.R. (2d) (84).

[25]         In my view, this case offers a principled reason to deviate from the general proposition.  This is because certain features of Mr. Lougheed’s reprehensible conduct were undertaken by him in his capacity as an executor of his late wife’s will and in flagrant violation of his duty to not prefer his personal interests (and grudges) over his fiduciary obligations.  The law demands that, as executor, Mr. Lougheed comport himself impartially in the WVA Claim.  In discharge of his neutral fiduciary role, Mr. Lougheed was expected, at a minimum, to provide the court with an unbiased and accurate information about the date of death assets and liabilities of the estate.  He purposefully elected not to do so.  The disclosure document itemizing those assets and liabilities at Mrs. Lougheed’s death was filed as an exhibit to an affidavit sworn by Mr. Lougheed in support of his probate application.  At trial, it became apparent that the probate document contained many errors.  Mr. Lougheed ultimately admitted that he could not verify its accuracy and attempted to distance himself from responsibility for its preparation.  The inaccuracies were not volunteered by Mr. Lougheed at trial; they were mostly exposed through the process of cross-examination.  Many of them pertained to Ms. Wilson’s alleged indebtedness to the estate, which were in part included as a means of bolstering Mr. Lougheed’s ill-conceived personal sense of entitlement to misappropriate the RIF proceeds as a set-off and to harm Ms. Wilson financially in the larger picture.

[26]         Mr. Lougheed persisted in his flimsy counterclaim in respect of Gordon Avenue even though he was aware that his wife had given that property to his daughter.  He likewise maintained his counterclaim in relation to Lawson Avenue despite the fact that his wife had left that property to her daughter under her will.  There was simply no reasonable basis for Mr. Lougheed to make a bona fide claim against his daughter in respect of either of these properties – and he knew that or was reckless about whether there was a legitimate basis for his allegations.  I find that Mr. Lougheed’s vendetta to “grind” Ms. Wilson and her husband into the ground, drove him to launch the counterclaim and several claims of indebtedness initially pled in the Debt Action and that he was motivated by spite towards Ms. Wilson and those he believed to be in her camp.  While Mr. Lougheed was free to engage in litigation warfare with his daughter in his personal capacity, the scope of his conduct qua executor was significantly constrained.  He manipulated his fiduciary office to advance his own personal gain.  That conduct is reprehensible and attracts judicial censure in the form of special costs.

[27]         Were the court to sanction Mr. Lougheed’s reprehensible conduct qua executor by denying his right to indemnity for legal costs out of the estate, it would have no punitive or deterrent effect in this case.  This is because Mr. Lougheed is the sole residuary beneficiary of the estate and, therefore, he indirectly covers all estate expenses.

[28]         It is difficult to separate the litigated claims in the Debt Action from the issues relevant to the WVA Claim.  The determination of whether the Whistler and Roberts Creek properties were gifted to Ms. Wilson by her late mother or were in the nature of loans was essential to both proceedings and those issues were deeply intermingled.  The issue of the alleged indebtedness in respect of the Gordon Avenue and Lawson Avenue properties advanced via the counterclaim was similarly intertwined with the issues material to Ms. Wilson’s WVA Claim.  The degree of overlap among those issues makes it exceedingly difficult to parse out what portion of the trial might reasonably be allocated to the WVA Claim, including the counterclaim, as distinct from the Debt Action.

[29]         It strikes me that in the circumstances, the preferable approach is to grant Ms. Wilson her costs in respect of 14 of the 17 days of the trial, and award costs for three of the 17 trial days to the Lougheed defendants.  The level of costs awarded to the Lougheed defendants is Scale B.  Ms. Wilson, on the other hand, will be entitled to two different levels of costs, as explained below.

[30]         The Court’s chastisement of Mr. Lougheed’s reprehensible conduct in his capacity as executor as discussed earlier will be reflected by ordering that four of the 14 days of costs granted to Ms. Wilson will be assessed as special costs.  What then should be the level of costs in relation to the remainder awarded Ms. Wilson?

[31]          Ms. Wilson’s submissions concerning her entitlement to costs at Scale C were not well-developed.  Although the evidence covered historical events and transactions, it was not complex litigation.  The volume of exhibits was in the ordinary range and no experts testified.  While the case raised at least one difficult issue of law and presented a few challenging evidentiary issues, the proceedings were not of extraordinary difficulty.  To the extent any issue of general interest or importance to the public at large or litigants in similar circumstances were raised, they were on the low side.  In my opinion, the factors that would militate in favour of an award of costs at Scale C are almost completely absent in this case.  It would be an error in principle to award costs at Scale C as a means of punishing litigation conduct:  Carrier v. Tate, 2009 CarswellBC 1085, 2009 B.C.C.A. 183.  It is noted that Ms. Wilson did not assert entitlement to an uplift of costs pursuant to Appendix B.

[32]         Accordingly, Ms. Wilson will have her costs on Scale B in respect of 10 of the 14 days of trial for which she has been awarded costs.  As stated previously, the other four days of costs to which she is entitled, are to be assessed as special costs.

“Ballance J.”

Trevor Todd

Trevor Todd is one of the province’s most esteemed estate litigation lawyers. He has spent more than 40 years helping the disinherited contest wills and transfers – and win. From his Kerrisdale office, which looks more like an eclectic art gallery than a lawyer’s office, Trevor empowers claimants and restores dignity to families across BC. He is a mentor to young entrepreneurs and an art buff who supports starving artists the world over. He has an eye for talent and a heart for giving back.

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